A settlement agreement awaiting approval from a federal judge would see Providence spending nearly $43 million to settle a class-action lawsuit alleging mismanagement of its employee retirement plan.
The case was brought in late 2024 by a former employee, with the parties in mediation to discuss a potential agreement since last October, according to court documents.
Recent weeks saw the sides reach a settlement in principle, per filed joint status reports, and last week, representation for the plaintiff filed an unopposed motion for preliminary approval laying out the deal’s terms. A Providence spokesperson also confirmed the settlement.
The former employee claimed the nonprofit system had violated the Employee Retirement Income Security Act (ERISA) by using forfeitures (matching funds that were not 100% vested at the time of termination) to reduce the organization’s contributions to its sponsored 401(k) plan. Terms laid out in plan documents direct plan fiduciaries to use forfeited funds should first go toward plan expenses not paid by Providence.
“Halter alleges that Defendants failed to act in accordance with Plan documents and in the process breached their fiduciary duties of prudence and loyalty, caused the Plan to enter into prohibited transactions, and engaged in self-dealing,” according to a summary of the allegations in the plaintiff’s unopposed motion.
The pending settlement would bring over $42.7 million in total benefits to the roughly 202,000 individuals who participated in or were beneficiaries of the 401(k) since Jan. 1, 2018. Just over half comes from the allocation of funds currently being held by Providence in plan forfeiture and special unallocated accounts to class members’ plan accounts, with some former plan participants having their accounts reinstated at Providence’s expense.
Providence would also be spending $15.3 million to pay all plan recordkeeping and administrative expenses for calendar years 2026, 2027 and 2028, as well as $6 million to pay any court-ordered attorney fees, service award to the plaintiff ($5,000 requested) and other miscellaneous expenses and costs.
If approved as requested, the deal would automatically deposit $106 in each class members’ plan account and cover about $75 of their recordkeeping and administrative expenses.
“These benefits, which total nearly $182 per Class Member, significantly exceed benefits negotiated in recent, similar ERISA settlements,” the filing reads.
The class-action lawsuit was initially filed in Oregon’s federal court but was transferred earlier this year to the U.S. District Court for the Western District of Washington.
Providence runs 51 hospitals and more than 1,000 other sites in eight states. It currently employs around 120,000 people. Across 2024, it reported nearly $31 billion in total operating revenues but a $644 million operating loss (-2.1% operating margin).
In response to a request for comment, a Providence spokesperson said that "under the terms of the settlement agreement, the parties have agreed not to comment on the settlement. We remain confident in the integrity and compliance of our retirement plans and in our continued commitment to supporting the long-term financial wellbeing of our caregivers."